Impact of Business Cycles and Interest Rate Fluctuation

Which of the following actions would the Federal Reserve System take to expand monetary policy: Raise the Federal Discount Rate Buy securities on the open market Increase Reserve Requirements Open additional financial institutions

Buy securities on the open market

Which of the following is considered an external cause of business cycles: Inventory levels Climatic changes Money supply Aggregate demand

Climatic changes

Which of the following factors characterizes the growth phase of business cycles: Demand for resources exceeds their availability. Producers are reducing their purchases of new goods. Consumers are putting more money into savings. Consumers and producers are borrowing more money.

Consumers and producers are borrowing more money.

A business manager realizes that the demand for his/her products now exceeds producers' capabilities, and producers have raised their prices to offset the high demand. Under these conditions, what phase of the business cycle should the manager begin to prepare for? Peak Trough Expansion Contraction

Contraction

The economy of the country of Swizzleland is undergoing rapid changes. Unemployment is low, consumer spending is high, and factories are increasing their production capabilities. Which phase of the business cycle is Swizzleland in? Trough Expansion Peak Contraction

Expansion

Which of the following is characteristic of an economy experiencing a short money supply: High levels of borrowing High unemployment Low interest rates Low tax levels

High unemployment

What action expands economic activities? Decreasing the purchase of durable goods Increasing inventory levels Decreasing investments in capital goods Increasing the unemployment rate

Increasing inventory levels

What will probably result if aggregate demand continues to grow, and production cannot meet the demand? Inflation Depression Trough Decreased production

Inflation

Which of the following occurs as a result of discoveries and innovation: New jobs are created. Economic activities contract. Money supply decreases. Production levels decrease.

New jobs are created.

During which phase of the business cycle are industries and businesses producing and selling goods at their maximum? Peak Trough Expansion Contraction

Peak

During which phase of the business cycle would there most likely be shortages of workers in certain skill areas? Expansion Peak Contraction Trough

Peak

What usually results when interest rates continue to increase? Spending decreases. Production increases. Purchasing power increases. Unemployment decreases.

Spending decreases.

If interest rates go down, which of the following would most likely occur: Banks will pay more to borrow money. The stock market will go up. Consumers will spend less. U.S. exports will decrease.

The stock market will go up.

Why does the Federal Reserve System raise interest rates? To overcome inequalities of income distribution To increase demand for products To decrease supply of products To fight inflation

To fight inflation

Why should a businessperson understand business cycles? To predict the exact beginning and end of cycles To determine the cause of each cycle To make plans that will help to level out cycles To prevent the cycles from happening

To make plans that will help to level out cycles

High levels of unemployment and business failures occur during what phase of the business cycle? Expansion Peak Contraction Correct! Trough High levels of unemployment and business failures occur during what phase of the business cycle? Expansion Peak Contraction Trough

Trough

How long do most business cycles last? Varying lengths of time At least 10 years Two full years Two consecutive quarters

Varying lengths of time

A benefit to producers and consumers of a growing economy is that it provides solutions to international problems. an increase in government control. a higher standard of living. workers with guaranteed employment.

a higher standard of living.

Ups and downs in the level of economic activity over a period of time are called a(n) business cycle. economic system. inventory level. economic growth.

business cycle.

Interest rates rising and falling by a wide range on a regular basis often are an indication of seasonal unemployment. economic instability. flexible capital. price equilibrium.

economic instability.

The period of time during the business cycle when production and employment increase is called a(n) expansion. trough. peak. contraction.

expansion

If aggregate demand is rising, businesses and industries will tend to cut employee wages. increase production. fire employees. decrease production.

increase production.

When producers are hopeful about the economic business outlook, they decrease their purchase of new goods. increase their investment in capital goods. increase their investment in savings. decrease their inventory levels.

increase their investment in capital goods.

The total quantity of money existing in a nation at one time is known as the money supply. dividends. aggregate demand. gross domestic product.

money supply.

An increase in aggregate demand indicates that consumers want or need more goods and services. tax relief. fewer goods and services. lower prices.

more goods and services.

The top of a business cycle is known as the expansion. contraction. trough. peak.

peak

The government can restrict the flow of money by raising taxes. increasing purchases. lowering interest rates. increasing employment.

raising taxes.

Gross domestic product that has been adjusted for inflation is known as real GDP. aggregate demand. GDP per capita. capital goods.

real GDP.

The country of Callisto is experiencing an economic contraction. Trade and economic activity have decreased, and GDP has fallen over the past six months. Callisto is most likely to be experiencing a(n) peak. expansion. depression. recession.

recession

The bottom of the business cycle is called a(n) depression. trough. expansion. peak.

trough